News Corp. bids $2 billion to boost Foxtel stake

MELBOURNE--News Corp.
NWS, +1.64%
has offered 1.97 billion Australian dollars (US$2 billion) to buy Consolidated Media Holdings Ltd. (CMJ.AU) in a move that, if successful, would strengthen the company's interest in Australia's largest pay TV service just as it restructures its traditional print business and cuts jobs.

The takeover bid, valued at A$3.50 a share, includes a 25% stake in pay TV operator Foxtel, which would double News Corp.'s stake in that company. Consolidated Media is controlled by Australian casino billionaire James Packer, who owns half the company.

The offer represents a 14% premium on CMH's closing price Tuesday of A$3.08. The company's shares jumped when they resumed trading Wednesday, and at 0455 GMT were up 9.4% at A$3.37. News Corp. doesn't intend to increase its cash offer, said Kim Williams, chief executive of its Australian unit News Ltd.

"That's it," said Mr. Williams in an interview after details of the offer were made public.

Mr. Packer said he "welcomes News" proposal and looks forward to CMH and News working together to address the detailed terms and conditions."

For News Corp., the takeover is the most significant investment in pay television since its bid to buy out British Sky Broadcasting, or BSkyB, broke down amid controversy over the company's involvement in a phone-hacking scandal. News Corp. has since increased the size of its share buyback program by several billion dollars.

News Corp. wants to increase its exposure to the profitable pay TV industry in Australia as it restructures its traditional print businesses Down Under. Foxtel's website says it has 2.2 million home subscribers at a time when newspapers in Australia are struggling to develop online business models. Rival Fairfax Media Group, the country's second-largest newspaper publisher, said this week it plans to cut 1,900 jobs, or about 20% of its staff, over the next three years to save money.

Mr. Williams, who was formerly head of Foxtel, also unveiled a restructuring of the company's print businesses Wednesday, shrinking its operating units and an unspecified number of job cuts. At the same time, Mr. Williams said the company had acquired Independent Business Media, publisher of the Business Spectator and Eureka Report, both aimed at the Australian business market.

"At this stage we cannot say how many roles will be made redundant as full details will be resolved with the implementation," said Mr. Williams in a note to staff. "Although there will be retrenchments, many roles will be retired through natural attrition."

Class B voting common shares in the company that is led by Rupert Murdoch traded up 0.7% in Sydney at A$20.18 at 0455 GMT. News Corp. also owns The Wall Street Journal.

If the offer for CMH is accepted, News Corp. will "double its stakes in Australia's leading pay television businesses, FOX Sports Australia and Foxtel, to 100% and 50% respectively," the company said in a statement.

Australian telecommunications company Telstra Corp. (TLS.AU) owns the remaining 50% of Foxtel. A Telstra spokeswoman said the company had worked successfully with News Corp. as partners in Foxtel "and we look forward to this partnership continuing to deliver value for Foxtel's shareholders and a great pay television experience for customers."

Consolidated Media reported a net profit of A$101.7 million for fiscal 2011, down 74% from the previous year. It said it received A$65 million from Foxtel and A$60 million from TV-content provider Premier Media Group, in which it holds a 50% interest.

News Corp.'s bid for CMH will still require the agreement of Seven Group (SVW.AU), which owns a 24% share in the company. Peter Warnes, head of equities at business-research firm Morningstar said News Corp.'s interest could trigger a counter offer from Seven, which is controlled by Australian billionaire Kerry Stokes. UBS AG is advising CMH on the deal, the company said.

Foxtel is a "very, very valuable business," said Mr. Warnes.

Seven Group said in a statement it will review the takeover proposal and "is considering its options."

The bid for CMH will face close scrutiny from Australia's competition regulator, which recently approved Foxtel's takeover of regional pay television company Austar after a lengthy review.

"There's no flashing red lights at the moment," said Rod Sims, Chairman of the Australian Competition & Consumer Commission, or ACCC. The regulator has started its review of the proposed deal.

Write to Gavin Lower at gavin.lower@wsj.com and Andrew Critchlow at andrew.critchlow@wsj.com

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.